By Barbara Kollmeyer
Gold prices fell Thursday after the Bank of England surprised the market by opting not to cut benchmark interest rates in the wake of the U.K.’s decision to exit the European Union.
U.S.stocks pared gains slightly but remained firmly higher in the wake of the decision, which some analysts had predicted would be a rate reduction
The dollar turned lower, offering some support for gold prices, which have been volatile this week.
August gold GCQ6, -1.47% fell $17.50, or 1.3%, to $1,326.10 an ounce; they were down to an intraday low of $1,325 earlier.
September silver SIQ6, -1.00% eased 23 cents, or 1.1%, to $20.18 an ounce. Silver futures settled near a two-year high on Wednesday, while gold climbed for the first time in five sessions.
The U.S. Dollar Index DXY, -0.07% was up ahead of the BOE decision but had since turned lower, last down 0.4% at 95.37.
The Bank of England unexpectedly left unchanged its key interest rate at a record low of 0.5%. It also made no changes to its 375-billion-pound ($495 billion) asset-purchase program. Markets had overwhelmingly priced in chances of a rate cut, which would have been the first since March 2009.
The decision marked the first after the June 23 referendum in the U.K. that set the country on course to exit the European Union, or Brexit. The rate-setting policy makers voted 8-1 to leave policy unchanged but most members said they expect monetary policy to be loosened in August when the new administration has laid out its Brexit strategy.
U.S. stock futures and the dollar initially rose Thursday on the view that a cut in interest rates from the BOE will force the Federal Reserve to shelve its plans for a rate increase this year. Stock demand dulls buying of haven gold, while a firmer dollar dents the value of dollar-priced gold for foreign buyers. See Market Snapshot.
As for gold’s underlying drivers, uncertainty could continue to underpin the asset as a hedge. Analysts at Commerzbank said Thursday “the political uncertainty, the banking crisis in Italy and negative real interest rates across the board argue against any continued price slide.”